April 17, 2013

American predicts profits through 2017 with US Airways merger

The newly merged American Airlines and US Airways expect to generate
$47.8 billion in revenues by 2017, growing passenger revenues with a
larger network.

The forecast, cited in the bankruptcy
reorganization plan and declaration statement filed Monday by American's parent company, AMR
Corp., also estimates that the combined carrier will be profitable in
2013 and for the next five years even as labor costs are set to rise.

Although
the two airlines don't expect to complete their merger until later this
year, the plan expects the new company will post a $2.5 billion profit
on $40.9 billion in revenues in 2013, a 5.6 percent increase in
revenues. The filing also predicts that the combined airline will
increase its network capacity by 1.9 percent over 2012.

The merger still needs to be approved by US Airways shareholders, the Department of Justice and American's creditors.

AMR
has asked the bankruptcy court to set a confirmation hearing date of
Aug. 15. Its creditors would be able to vote on the reorganization plan
at that time.

Through the bankruptcy process, American has
renegotiated its union contracts to lower labor costs. And while the
reorganization plan assumes labor costs of $7.6 billion in 2013, they
are expected to jump 25 percent by 2017 to $9.5 billion.

The
carrier also informed employees that nonunion workers will receive 2.3
percent of the common stock issued as part of the proposed
reorganization. About 1.4 percent of that stock will be shared by
American's agents, representatives and flight planners while the rest is
given to support staff and management that do not have other incentive
plans, the company said in a letter to employees Monday.

In its
reorganization plan, the carrier also disclosed that it will save $300
million through 2017 with the changes made to purchase agreements with
Airbus and Boeing. An additional $120 million will be saved in 2018 and
beyond. And depending on the number of aircraft options American
exercises, the savings could increase.

And while American
continued to explore other alternatives aside from a merger with US
Airways last year, deals with other carriers never materialized.

"Discussions
with those airlines did not progress because a transaction with any of
those airlines was not desirable," the filing said. "After evaluating
the potential strategic alternatives, it appeared that a business
combination with US Airways was the only viable option for American to
consider versus" remaining independent.